The Monetary Policy Committee of the Central Bank of Nigeria has cut the benchmark interest rate by 350 basis points to 23 per cent from 26.5 per cent, prompting Organised Private Sector leaders to demand cheaper loans for businesses.

The CBN Governor, Olayemi Cardoso, announced the decision on Tuesday at the end of the committee’s 307th meeting in Abuja. “The committee decided as follows: reset the monetary policy rate at 23 per cent,” Cardoso said.

The committee also recalibrated the standing facilities corridor to +50/-300 basis points around the MPR, while retaining the Cash Reserve Requirement for deposit money banks at 45 per cent, merchant banks at 16 per cent and non-Treasury Single Account public sector deposits at 75 per cent.

The latest decision followed two consecutive holds at 26.5 per cent in May and July, after the committee cut the rate by 50 basis points in February.

In response, Organised Private Sector leaders demanded that commercial banks pass on the benefits of the Central Bank of Nigeria’s interest rate cut to borrowers, warning that the reduction in the benchmark rate alone would not solve the country’s financing challenge.

Speaking in phone interviews with The PUNCH, they called for lower lending rates and other measures to improve access to credit for businesses.

Despite the scale of Tuesday’s reduction, Cardoso insisted that the decision should not be interpreted as a shift to monetary easing, describing it instead as an operational adjustment intended to improve monetary policy transmission.

“We will stay on the course, which has been a restrictive one, for as long as we have to,” he said. “And that’s why I re-emphasise that you should not see this as an easing. This is a reset and a recalibration. That is all it is.”

The governor explained that a widening gap between the MPR and prevailing interbank rates had weakened the effectiveness of monetary policy, requiring the CBN to realign its benchmark rate with market conditions.

The MPC said the CBN’s adoption of the Nigerian Overnight Financial Average as a transaction-based operational benchmark had improved transparency in money market operations, adding that the latest recalibration would restore the MPR as the principal signal of monetary policy.

Explaining why the committee acted now, Cardoso pointed to improving macroeconomic conditions after years of aggressive tightening. “Fundamentals have changed,” he said. “We are at macroeconomic stability.”

According to him, “The tight thing that we have done, in our view, has done its job. It has worked. The policy tools that we have used have worked.” The governor said foreign exchange pressures had receded considerably, while investor confidence and Nigeria’s external position had strengthened.

Nigeria’s gross external reserves stood at $55.25bn as of September 18, 2026, their highest level in 18 years and sufficient to finance about 11.3 months of imports of goods and services.

The balance of payments surplus also increased to $3.51bn in the second quarter from $2.38bn in the first quarter, while the current account surplus jumped by 67.92 per cent to $7.54bn from $4.49bn.

Cardoso attributed part of the stronger external buffers to increased diaspora remittances. He said monthly remittances had risen from about $200m when the CBN intensified its reforms to almost $1bn by July, putting the apex bank within reach of its $1bn monthly target.

The reforms, he said, included expanding access to Bank Verification Numbers for Nigerians abroad, strengthening oversight of International Money Transfer Operators and requiring dedicated settlement accounts.

The rate cut also came against the backdrop of sustained moderation in inflation. Headline inflation eased to 15.39 per cent in August from 15.43 per cent in July, marking a third consecutive monthly decline.

Food inflation fell to 19.57 per cent from 20.31 per cent, while core inflation moderated to 13.29 per cent from 14.97 per cent. Month-on-month headline inflation also slowed sharply to 0.71 per cent from 1.57 per cent.

The MPC attributed the trend to earlier monetary tightening, exchange rate stability and improved inflation expectations. It, however, warned that prolonged geopolitical tensions in the Middle East and election-related spending could pose fresh inflationary risks.

The committee expects inflation to moderate further in the short to medium term, supported by foreign exchange stability, the lagged effects of previous tightening and improved food supply during the harvest season.

Containing excess liquidity

Cardoso also said the CBN was prepared to contain excess liquidity as Nigeria approaches another election cycle. “We are ready,” he said, explaining that the bank had analysed previous election cycles and developed different scenarios.

He said the CBN would monitor currency in circulation, banking system liquidity, monetary aggregates and foreign exchange demand. “We will proactively deploy any tools and instruments to mop up any excess liquidity,” Cardoso said. “We will not allow ourselves to be caught unaware in any form.”

He added that adequate currency would remain available but warned that currency abuse would not be tolerated, with the CBN intensifying collaboration with law enforcement agencies. The governor also encouraged greater use of electronic payments, noting that digital transactions improve transparency and leave an audit trail.

On the broader economy, the MPC said real Gross Domestic Product grew by 4.43 per cent in the second quarter of 2026, compared with 3.89 per cent in the first quarter.

Non-oil growth accelerated to 4.31 per cent from 3.94 per cent, while the oil sector expanded by 7.31 per cent, up from 2.57 per cent. The Composite Purchasing Managers’ Index also rose to 52.7 points in August from 51.1 points in July.

Reflecting on his three years as CBN governor, Cardoso said his administration inherited an economy marked by declining confidence, persistent currency depreciation, high inflation and a dysfunctional foreign exchange market.

Cardoso identified the return of the CBN to its core price and financial stability mandate, exchange rate unification, banking recapitalisation and rebuilding of external reserves among the major changes implemented during the period.

He said excessive Ways and Means financing and more than N10tn in intervention programmes had previously injected substantial liquidity into the economy. Cardoso also described the recently signed fiscal-monetary coordination agreement between the CBN and the Federal Ministry of Finance as important to Nigeria’s planned transition to inflation targeting.

“I think the difference here is that we’ve decided to institutionalise this,” he said, explaining that the arrangement would prevent coordination from depending on individual officeholders. “You can’t do it with monetary policy alone,” he added, arguing that effective fiscal coordination would be critical to sustaining low and stable inflation.

The governor also described Nigeria’s return to major global investment indices as a “vote of confidence” that could attract additional foreign investment, deepen the capital market and improve foreign exchange liquidity.

The MPC said it would continue to assess the effectiveness of the recalibrated framework, while future decisions would remain data-dependent. Its next meeting is scheduled for November 23 and 24, 2026.

OPS reacts

The President of the Lagos Chamber of Commerce and Industry, Leye Kupoluyi, described the cut as a significant easing of monetary policy but insisted that lenders must also reduce risk to unlock credit for businesses.

“Monetary easing must be matched by measures that reduce lending risk and improve businesses’ capacity to borrow and repay,” Kupoluyi said.

He added that the current rate reduction offered an important window of opportunity that must translate into credit, investment and jobs. “We urge policymakers not to regard the MPR reduction as sufficient in itself to resolve the financing constraints confronting Nigerian businesses,” Kupoluyi said.

The LCCI president also flagged insecurity and political uncertainty as factors that could still weigh on lenders’ willingness to extend credit, particularly to small and medium-sized enterprises, noting that banks weigh cash flow, collateral and sectoral risk, and not the policy rate alone, before approving loans.

The President of the Association of Small Business Owners of Nigeria, Femi Egbesola, hailed the cut as one of the best pieces of economic news in recent years and called on banks to extend the benefit to existing borrowers.

“We hope that the banks will be transparent enough to also cut lending rates of existing loans,” Egbesola said, noting that lenders had historically been quick to raise rates on existing loans when the MPR rose, but slow to reduce them when it fell.

Egbesola said cheaper credit would drive business expansion and boost investor confidence, and pointed to fresh interest from foreign investors in funding Nigerian businesses as a sign that conditions were improving.

He, however, warned that banks could channel the additional liquidity towards large corporations, government treasury bills or bonds instead of SMEs, citing the ongoing Dangote initial public offering as a potential competing destination for funds.

“That’s why strategy should come into place. That’s why the government, too, particularly CBN, should now be intentional about ensuring that this is reflective of the real economy, which is the business sector,” Egbesola said.

He called for the CBN to also address collateral requirements, loan tenor and additional charges, and not interest rates alone.

In a policy document, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, welcomed the Central Bank of Nigeria’s decision to cut the Monetary Policy Rate by 350 basis points to 23 per cent, describing it as a timely adjustment that could ease financing pressures on businesses.

Yusuf said the magnitude of the reduction was largely unexpected and represented a significant shift from the prolonged restrictive monetary policy regime.

He said, “The reduction of the MPR to 23 per cent should therefore be viewed not merely as monetary easing, but as an important realignment of the policy rate with prevailing macroeconomic and financial-market conditions.”

According to him, the decision could provide significant relief to the real sector, where high borrowing costs have constrained investment, production, working capital and job creation.

Yusuf, however, stressed that the benefits would depend largely on whether commercial banks reduce lending rates. “Without meaningful transmission to borrowers, the impact of the policy adjustment on investment and economic growth would be limited,” he said.

He added that lower rates could reduce the Federal Government’s domestic borrowing and debt-service costs, potentially freeing resources for infrastructure and other development priorities.

Yusuf, however, warned of possible portfolio outflows and renewed foreign exchange pressures, urging the CBN to remain vigilant.

He also cautioned that monetary easing alone could not guarantee sustainable recovery, citing energy costs, insecurity, logistics bottlenecks, infrastructure deficits and regulatory costs as structural pressures requiring fiscal reforms.

On his part, the Chief Executive Officer of Economic Associates, Ayo Teriba, said the rate cut was long overdue and reflected improvements the CBN had made in the foreign exchange market, fiscal discipline and bank capitalisation since Olayemi Cardoso took over as governor in September 2023.

Teriba noted that the apex bank had raised net foreign reserves from under $4bn to over $35bn, kept Ways and Means advances out of use, and pushed banks back into compliance with single obligor limits.

“So, if the Central Bank of Nigeria now feels it’s time to reset the Monetary Policy Rate, the reset has been long overdue. So, this is a welcome development,” Teriba said.

He, however, questioned whether the cut went far enough to close the gap between the MPR and market rates, and raised concerns about the timing, four months to a general election.

“Much as I understand the case for easing, I would have waited until after the election,” Teriba said, adding that he hoped electoral spending would not undermine the disinflation trend that informed the committee’s decision.